The WTO’s trade projections, set out in the new “Global Trade Outlook and Statistics” report, estimate real global GDP growth at market exchange rates of 2.4% for 2023. Projections for both trade and output growth are below the averages for the past 12 years of 2.6% and 2.7% respectively (see chart).
WTO Director-General Ngozi Okonjo-Iweala said: “Trade continues to be a force for resilience in the global economy, but it will remain under pressure from external factors in 2023.This makes it even more important for governments to avoid trade fragmentation and refrain from introducing obstacles to trade. Investing in multilateral cooperation on trade, as WTO members did at our Twelfth Ministerial Conference last June, would bolster economic growth and people’s living standards over the long term.”
The 2.7% increase in world trade volume in 2022 was weaker than the WTO’s October forecast of 3.5%, as a sharper-than-expected quarter-on-quarter decline in the fourth quarter dragged down growth for the year. Several factors contributed to that slump, including elevated global commodity prices, monetary policy tightening in response to inflation, and outbreaks of COVID‑19 that disrupted production and trade in China.
Notably, trade growth last year turned out to be in line with the 2.4% to 3.0% baseline scenario in the WTO’s March 2022 initial report on the war in Ukraine, and well above its more pessimistic scenario in which trade would have grown just 0.5% as countries started to split into competing economic blocs. In the event, international markets remained broadly open. A follow-up study the WTO released last month documented how vulnerable economies were able to compensate for essential food supplies cut off by the war by finding alternative products and suppliers.
The 1.7% forecast for trade growth in 2023, meanwhile, is up from the previous estimate of 1.0% from last October. A key factor here is the relaxation of COVID-19 pandemic controls in China, which is expected to unleash pent-up consumer demand in the country, in turn boosting international trade (see table).
WTO Chief Economist Ralph Ossa said: “The lingering effects of COVID-19 and the rising geopolitical tensions were the main factors impacting trade and output in 2022 and this is likely to be the case in 2023 as well. Interest rate hikes in advanced economies have also revealed weaknesses in banking systems that could lead to wider financial instability if left unchecked. Governments and regulators need to be alert to these and other financial risks in the coming months.”
Looking ahead to 2024, trade growth should rebound to 3.2%, as GDP picks up to 2.6%, but this estimate is more uncertain than usual due to the presence of substantial downside risks, including geopolitical tensions, food supply shocks, and the possibility of unforeseen fallout from monetary tightening.
The full report is available here.